A VALUE-CHAIN BASED PROCESS MODEL FOR SUPPORTING BUSINESS PROCESS REENGINEERING

Constantly envisioning how the rapid developments in information
technology offer new opportunities, and engineering business processes
accordingly will continue to be a difficult problem for senior management.
An important observation by Keen (1991) is that over the last
three decades, effective use of rapidly changing technology has lagged
its availability. A central problem is that of justifying the technology,
measuring its business value. The value-chain model articulated by
Porter (1985) is a natural candidate in providing a basis for this evaluation.
It is based on the simple economic theory that a firm remains
competitive by virtue of being a low cost producer or differentiating
its products/services to the customer, that is, by providing customer
satisfaction. It is intuitive to think of "the customer" as the end
user of a product or service. However, projecting this definition into
the organization, where all pieces of work within it have a customer
that needs to be satisfied provides a good basis for work design and
its implementation. As technology evolves, forcing the organization to
reassess its customers, the work must be redesigned. This is becoming
known increasingly as "process reengineering" .
Porter's model has found widespread appeal among practitioners
at the strategic level due to its theoretical simplicity and commonsense
appeal. Several methodologies have been designed around this
model that encourage executives to "think through" and identify technologies
that could provide competitive advantage. However, these
methods have some serious limitations due to the lack of a sound
conceptual underpinning and their inability to link explicitly, technology
to business value metrics. Based on an analysis of one specific
industry (insurance) we have found that simple process oriented models
such as BSP, when extended to deal with value (in terms of cost
or product/service differentiation to the customer), provide a sound
basis for exploring process reengineering. An implementation of this
methodology should enable management to simulate how a system
would "react" to various types of inputs in terms of specific metrics
of interest.